Tasmanian Dairy Industry Strategic Plan 2011 – 2015 - DairyTas

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Tasmanian Dairy Industry Strategic Plan 2011 – 2015 - DairyTas

Tasmanian Dairy Industry

Strategic Plan 20112015


Vision

To achieve industry development and growth

through profitability and internationally competitive levels

of production in a sustainable manner.

Tasmanian Dairy Industry

Strategic Plan 20112015

This Plan

1. The Tasmanian Dairy Industry 20112015 Strategic Plan builds on the industry’s

previous plans developed and implemented since 2002. This plan sets out the critical

issues to be addressed, objectives to be achieved and strategies to be implemented

over the period 20112015.

2. The strategic direction of the Tasmanian Dairy Industry has been established by a

Reference Group comprising members across all levels of the Dairy Industry supply chain

in Tasmania. In this respect, the Tasmanian Dairy Industry 20112015 Strategic Plan

represents a departure from a focus predominantly on dairy businesses and farmers,

to a broader industry focus.

3. It reflects a view that, for the industry in Tasmania to continue to develop, there needs

to be a much closer working relationship and cooperation between all stakeholders

with a clearer appreciation of the vital role each has to play.

Mission

The Tasmanian Dairy Industry will focus

on long term profitability through:

• Maintaining low on–farm production costs;

• Improving dairy business management;

• Developing and maintaining strong supply chain relationships; and

• Supporting efficient, innovative and responsive processing capacity.

4. In the development of this Strategic Plan the Reference Group consulted widely including

representatives and information from:

Tasmanian dairy farmers;

Tasmanian Farmers and Graziers Association;

Tasmanian Institute of Agricultural Research;

Dairy Australia;

DairyTas Board;

• Department of Economic Development, Tourism and the Arts;

• Department of Primary Industries, Parks, Water and Environment;

• Australian Bureau of Agricultural Resource Economics - Bureau of Rural Sciences;

• Milk processors;

• Financial institutions; and

• Agricultural suppliers.

5. The Reference Group, coordinated by the DairyTas Board, will oversee the implementation

of this Plan.

2 3


The Tasmanian Dairy Industry

• Is highly export oriented and has a high exposure to national and international dairy markets;

• Has been exposed to significant volatility in demand and this has flowed through

to farm gate milk prices;

• Has significant potential for growth through access to water and land resources to develop

new dairy farm operations.

• Participants have experienced increased pressure on cash flow, particularly highly

geared farmers and this has led to:

- Greater emphasis on improving performance across all aspects of dairy farm management;

- Heightened focus on controlling production costs;

- Continued development and adoption of technology to improve operating efficiencies.

The following table outlines the performance of the Tasmanian Dairy Industry in 2010.

When compared with 2006, the Tasmanian industry has shown significant improvement

ahead of national trends, including:

• An increase in farm milk production;

• An increase in the number of cows; and

• An increase in the average herd size.

Industry Performance and Highlights over the past 5 years

The Tasmanian Dairy Industry has continued to perform at a level higher than the Australian

average across a range of measures as described in the following table.

Measure 2005 – 2009 Average 2005 – 2009 Average

Tasmania

australia

Return on Capital (%) 3.1 2.0

Return on Capital (inc Capital Appreciation) 9.2 6.9

Cost of Production* (Cents per litre) 34.0 36.9

Purchased Feed Costs (Cents per litre) 8.3 12.4

Farm Gate Value of Dairy Production ($M) $251M

Source: ABARE

*Cost of production includes interest, imputed labour and depreciation

Measure 2006 2010

Number of dairy farms 490 440

Number of dairy cows 135,000 143,700

Average herd size 275 326

Milk production (million litres) 610 673

Production per cow (litres) 4,520 4,725

Proportion of Australia’s milk production (%) 6.2 7.5

Total employment 2,750 2,700

The return on assets of Tasmanian dairies has been consistently higher than the Australian

average and is continuing to improve since the low point of 2004. Over the decade to 2009

Tasmanian dairy farm asset values/kg MS were similar to national values.

A major source of sustainable competitive advantage for the Tasmanian Dairy Industry

is its access to lower cost grass–based fodder crops due to higher levels of reliable rainfall.

This advantage results in generally lower costs of production, particularly fodder costs,

when compared with dairy businesses located on the Australian mainland.

Whilst the exposure of the Tasmanian dairy farmers to debt has generally risen over the

past 5 years, this has enabled the industry to increase both its capacity and capability.

This Plan expects the Tasmanian Dairy Industry’s strong performance, particularly when

compared with industry performances at a national level, to improve further over the

period 2011 to 2015.

Forecast milk production 20112015 (million litres) 860MLs in 2015

This is despite recent significant fluctuations in global demand and prices for dairy products.

Following these trends, the Tasmanian dairy industry expects to increase annual milk production in

the vicinity of 5% annually with a target of 860 million litres in 2015. This production target assumes:

1. Sufficient processing capacity;

2. Reasonable seasonal conditions;

3. Continued growth in global markets;

4. Industry’s capacity to manage volatility;

5. Attracting new entrants to the industry; and

6. Access to necessary resources.

It is expected that planned development of significant new land and water resources for dairy

farming will increase this growth trend.

4 5


Industry Outlook

1. The international dairy market has become increasingly volatile with direct implications

for Tasmania;

2. The importance of China is continuing to grow as a major importer of dairy products,

particularly whole milk powder;

3. There is increasing substitution between competing dairy and non-dairy ingredients;

4. Demand is continuing to increase for competitively priced dairy products, particularly

in developing countries in part due to the westernisation of Asian diets;

5. Milk production in Australia is forecast to increase slowly over the next five years based

on the assumption that world demand will continue to grow and that reasonable seasonal

conditions eventuate;

6. The downsides to this positive outlook are the risks associated with the volatility of international

markets and the impact on demand for dairy products in Australia;

7. Over the period of this Plan dairy farms are expected to experience continued volatility in

farm gate prices, fodder costs and fertiliser costs;

8. The Tasmanian Dairy Industry needs to remain competitive internationally with regard to

resources, investment and markets;

9. In Tasmania, the industry exhibits potential for stronger growth and higher production levels

supported by sufficient processing capacity from existing or new operators;

10. Whilst climate change is likely to have a significant impact on the Australian dairy industry,

the Tasmanian industry is well positioned to respond positively during the term of this plan.

Strategic Response

Approach

1. The Tasmanian Dairy Industry has prepared

a strategic plan that drives the development

and maintenance of a vibrant dairy industry

in Tasmania over the long term.

2. The Industry continues to concentrate on

delivering optimum performance across the

core farm based activities of:

a. Animal and feedbase performance;

b. Natural resource management;

c. Animal health and welfare;

d. Human resources and skill development; and

e. Business planning and financial management.

3. A vibrant dairy industry in Tasmania requires high performance in each core activity area

with the following factors being addressed across all levels of the industry:

a. Maximising profitability;

b. Building the industry’s image;

c. Continuing to focus on growth;

d. Available land, water and people resources;

e. Managing industry volatility;

f. Adoption of research and innovation;

g. Influencing and responding to government policy and regulation; and

h. Building and maintaining critical relationships along the supply chain.

4. Continuing investment in processing capacity and innovation in alignment with industry and

market development.

The objectives and strategies included in this Plan incorporate the management of these

factors on a number of levels as depicted in the diagram below.

Human Resources

Business Planning and

Financial Management

Maximising

Profitability

Available

Resources

Maintain

& Build

Image

and Skill Development

Focusing

On Growth

Vibrant

Dairy

Industry

Influence &

Respond to

Government

Policy

Animal and

Feedbase Performance

Adopting

Research &

Innovation

Building

Relationships

Managing

Volatility

Management

Natural Resource

Animal Health

and Welfare

6 7


Key Success Factors

The continued development of the Tasmanian Dairy Industry will require

management of a range of areas including:

1. Image and Reputation

Developing and maintaining the industry’s brand and image as an attractive career and

investment option. The Tasmanian Dairy Industry must manage and build its reputation as:

a. An attractive industry for investors, employers and workers;

b. A reliable supplier of safe, high quality dairy products;

c. Responsible custodians of the State’s natural resources; and

d. Worthy recipients of support and encouragement from the general community.

2. Profitable Businesses

Improving the profitability of businesses at each stage of the Tasmanian Dairy Industry supply

chain through maintaining a clear understanding of those factors that determine profitability and

developing the capacity to respond to changes in each of these factors over time.

A focus on profitability will include working with industry stakeholders to:

a. Maximise returns to industry participants;

b. Identify and encourage production efficiencies;

c. Manage dairy production overheads including those relating to:

i. Labour;

ii. Energy;

iii. Transport;

iv. Finance; and

v. Compliance.

3. Growing the Industry

Continuing to grow the value and size of the Tasmanian Dairy Industry is a major strategy

in maintaining global price competitiveness through identifying and implementing actions to:

a. Increase the Tasmanian Dairy Industry’s share of Australian and international markets;

b. Improve productivity across the value chain;

c. Compete internationally across the value chain;

d. Develop higher value products; and

e. Improve access to key industry resources including:

i. Water;

ii. Nutrients;

iii. People;

iv. Finance;

v. Land; and

vi. Technology.

4. Access to Land, Water and People Resources

Ensuring that the Tasmanian Dairy Industry has continued access to the resources it needs by:

a. Understanding the implications for the industry of the likely effects of climate change;

b. Identifying and planning for the industry’s resource requirements including land, water

and people for the medium and long terms and;

c. Developing strategies to overcome barriers to resource acquisition including those relating to:

i. Competition;

ii. Price;

iii. Compliance;

iv. Technology; and

v. Community support.

5. Adoption of Research and Innovation

a. Continue to develop and maintain partnerships and alliances with key organisations

to capture and implement relevant knowledge that improves the Tasmanian Dairy Industry’s

competitive advantage;

b. Develop programs that provide access for dairy farmers to new knowledge relevant to

their businesses; and

c. Continue to encourage dairy farmers to become aware of and adopt new knowledge relevant

to their businesses.

6. Managing Volatility

Managing dairy businesses that are responsive to volatility through a range of options including:

a. Regular surveillance of market conditions and indicators;

b. Diversifying income sources and market opportunities;

c. Flexibility in production systems including the main factors of production and technology;

d. Ensuring compliance with changing legislative, industry and community requirements;

e. A full supply chain response; and

f. Identifying and implementing strategies to develop and improve dairy business resilience.

8 9


7. Key Relationships

Identifying, developing and maintaining relationships with key industry stakeholders at each stage

of the Tasmanian Dairy Industry supply chain including those relating to:

a. All levels of government;

b. Consumers and consumer groups;

c. Dairy farmers;

d. Milk processors;

e. Transport operators;

f. Research and development service providers;

g. Industry bodies;

h. Training and education providers;

i. Agriculture service providers; and

j. Key community groups.

8. Working with Government

The Tasmanian Dairy Industry sees government at all levels as vital to improving the industry’s

competitiveness, vibrancy and long term profitability through:

a. Maintaining and developing direct relationships with all levels of government;

b. Playing an active role in influencing government through relevant industry bodies including

the Tasmanian Farmers and Graziers Association, DairyTas Board, Australian Dairy Farmers,

Australian Dairy Industry Council and Dairy Australia;

c. Ensuring government at both ministerial and agency levels is aware of and responding to the

key issues and opportunities facing the industry, particularly during the life of this Plan.

Strategic Issues, Objectives and Strategies

This strategic plan sets out for each core area:

a. The key issues and opportunities to be addressed over the next five years;

b. What the Tasmanian Dairy Industry wants to achieve (objectives) during this time period; and

c. How the objectives will be met (strategies).

Key Issue/Opportunity

Skill levels in the Tasmanian

Dairy Industry need to be

developed to meet the future

needs of the Industry

particularly in the areas

of managing:

• Business administration;

• Innovation;

• People; and

• Larger and more complex

dairy businesses.

HUMAN RESOURCES AND SKILL DEVELOPMENT

Objective

Dairy industry employers,

employees, investors and

leaders with the skills to

manage the changing

demands of a commercially,

environmentally and socially

successful dairy industry in

Tasmania.

StrategY

1. Continue to promote the

Tasmanian Dairy Industry

as an attractive investment

and career option.

2. Ensure that the skill

requirements for successful

business management

at each stage of the supply

chain are identified and

understood – particularly

employer skills.

3. Continue to work with

industry partners to identify

and deliver relevant skill

development and training

opportunities for members

of the Tasmanian Dairy

Industry.

10 11


Natural Resource Management

Business Planning and Financial Management

Key Issue/Opportunity

Objective

StrategY

Key Issue/Opportunity

Objective

StrategY

1. Increasing competition

between users of natural

resources in Tasmania.

2. Increasing focus by the

community on the

responsible management

and sustainable use of

natural resources.

3. Lack of strong linkages

between environmentally

responsible natural

resource management

and commercial realities,

particularly during difficult

operating conditions.

4. Access to irrigation

water and associated

infrastructure.

5. Influence of climate change

and the carbon economy

on the resources available

to the industry.

1. The Tasmanian Dairy

Industry operates as a highly

efficient user of natural

resources, particularly water

and land.

2. The Tasmanian Dairy

Industry is perceived by the

Tasmanian community as a

responsible manager of

natural resources.

3. The Tasmanian Dairy

Industry manages natural

resources to maximise the

commercial opportunity

from being seen as a ‘clean

and green’ producer.

4. The Tasmanian Dairy

Industry understands the

basis of access to irrigation

water and associated

infrastructure, and that this

access is sufficient to meet

industry needs.

5. The industry is in a position

to understand and adapt to

the effects of climate change

and carbon trading.

6. The Tasmanian Dairy

Industry is in a position

to understand and identify

opportunities for carbon

sequestration and mitigation

of greenhouse gas emissions.

1. Continue to improve

resource efficiency in dairy

production systems.

2. Continue to promote the

Tasmanian Dairy Industry

as a responsible user of

natural resources.

3. Clearly understand the

interests of, and work with,

community stakeholders.

4. Develop resources that raise

farmer awareness of

environmental issues and

the integration of

environmental management

with farm business

management.

5. Identify and develop

relevant networks and

relationships and develop

an economic case to secure

access to sufficient

quantities of land and

water for industry growth.

6. The industry adopts

innovation and information

to responsibly manage the

risks and opportunities

associated with climate

change and greenhouse

gas emissions.

1. Information is available to

all members of the supply

chain to make informed

business decisions.

2. Dairy businesses adopting

improved business

management systems.

3. Increased volatility of

markets and operating

conditions requiring

greater responsiveness.

1. Meet the requirements of

industry partners and

supply chain for information

that is compliant, timely and

accurate.

2. Dairy businesses have the

skills and information

required to effectively

manage their business.

3. Dairy businesses clearly

understand and know the

key drivers of their

profitability.

4. Dairy businesses respond

to changes in operating

conditions in a timely and

positive manner.

5. Growth that is profitable and

resourced (land capability,

water and people).

1. Continue to work with

Tasmanian dairy business

operators to assist them to

maximise their profitability.

2. Continue to work with

Tasmanian dairy business

operators to assist them to

identify, understand and

implement business models

and systems to:

• Manage volatility;

• Develop resilience;

• Maximise efficiency and

minimise costs;

• Grow the business; and

• Identify and capture

market opportunities.

3. Identify and develop

relationships with key

service providers including:

• Financial institutions;

• Training providers;

• Business advisers; and

• Milk processors

in order to improve dairy

farmers access to relevant

business and financial advice

and assistance.

4. Understand the major

impacts on business and

industry with a view to

being able to influence:

• Relevant legislation;

• Licensing requirements;

• Taxation; and

• Operating requirements.

12 13


Animal health and welfare

animal and feedbase performance

Key Issue/Opportunity

Objective

StrategY

Key Issue/Opportunity

Objective

StrategY

1. Opportunity to increase

farm profitability through

improved animal welfare.

2. Industry image around

animal welfare practices.

3. Protect access to markets

based on animal health

and welfare standards.

4. Risk from pests and

diseases.

1. The Tasmanian Dairy

Industry’s animal welfare

reputation is held in high

regard by markets and the

general community.

2. Dairy farmers are aware of

and manage the linkages

between animal welfare,

farm profitability and

community support.

3. Strengthen industry image

through a better community

and market understanding of

animal welfare practices.

4. Maintain the comparative

pest and disease free status of

the Tasmanian Dairy Industry.

5. Community support is

maximised through animal

welfare standards being met.

1. Improve dairy farmer skills

and awareness of animal

welfare issues and

benchmark farm practices.

2. Dairy industry promotional

material and events to

include positive messages

regarding the animal welfare

status of livestock on

Tasmanian dairy farms.

3. Support industry members

to comply with biosecurity

protocols.

4. Support dairy farmers to

implement best possible

livestock management

practices.

5. Improve farmer awareness

of the industry’s Guide to

Tasmanian Dairy Cattle

Welfare and cattle welfare

standards.

1. Need to increase farm

profitability through

improved animal and

feedbase performance.

2. To implement leading

edge animal and feedbase

performance technology.

3. Maintaining industry

growth based on the

relatively low cost

production of high

quality dairy products.

4. Climate variability and

carbon trading will impact

on pasture and feed

management systems.

1. Maximise profitability

through high level animal

and feedbase performance.

2. Utilise leading edge

technology to better manage

animal and feedbase

performance opportunities.

3. Be a leader in low cost,

high performance animal

and feedbase.

4. Manage climate variability

impacts around pasture

based systems.

1. Continue to work with

dairy farmers to improve

their skills and knowledge

around pasture and feed

management.

2. Utilise dairy industry

marketing material and

events to promote the

reputation of the Tasmanian

Dairy Industry as a leader in

low cost, high performance

animal and feedbase

management.

3. Continue to develop and

utilise relationships with

research and development

partners to continually

improve the industry’s

animal and feedbase

performance.

4. Support resources and

programs to ensure that

Tasmania maximises its

pasture production potential

and water access to support

irrigation.

5. Achieve a better

understanding of the use of

farm-–based benchmark

data to improve industry

performance.

6. Work with farmers to

understand the impacts of

climate change and to adapt

to increased climate

variability.

14 15


For more information

DairyTas Board

PO Box 1352 Burnie 7320

Ph 03 6432 2233

Fax 03 6432 2277

Email tasdairy@bigpond.com

www.dairytas.com.au

www.intodairy.com

This document has been prepared under the direction of an industry

reference group convened by DairyTas with representatives from:

DairyTas Board

Tasmanian Farmers and Graziers Association Dairy Council

Dairy Australia

Tasmanian Institute of Agricultural Research Dairy Centre

Milk Companies (Fonterra, National Foods and Cadbury)

Department of Economic Development, Tourism & the Arts

Agribusiness (Rabobank, Roberts, Monds and Affleck and VDL Company)

Moore Consulting

Published November 2010

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